Innovation and Differentiation - the Key for Chinese Pesticide Makers     

Nantong Jiangshan Agrochemical & Chemical Co., Ltd. (SH: 600389) posted the sales rose 18.95% in 2008 from a year earlier to RMB3.23 billion, driven by higher sales volume and increasing prices of glyphosate in the first half of 2008, and higher sales for chemical products. Sales for its pesticide business alone gained 64.9% to RMB1.83 billion.
   The company's net profit surged 175.91% to RMB302 million. EPS was RMB1.52.
   The government's efforts to improve environmental protection standards is set to give a boost to pesticide products featuring high efficiency, safety, and environmental friendly, the company said. Pesticide formulations will be increasingly developed in the forms of microemulsion, concentrated emulsion, granule, water dispersible granule and aqueous solutions. Meanwhile, the portion of herbicide in the whole pesticide mix is expected to rise gradually year on year.
   Sinochem International Holding Co., Ltd. is the largest shareholder in Jiangshan Agrochemical.

Zhejiang Xinan Chemical Industrial Group Co., Ltd. (Xinan Chemical, SH: 600596) reported the operating revenue boosted 88.59% year-on-year to RMB7.219 billion in 2008. The net profit doubled to RMB1.69 billion. EPS for 2008 was RMB5.89 while stood at RMB3.54 for H1 2008.
   The surging growth is driven by the demand hike for glyphosate in the Chinese market and the sharp rise of glyphosate price in H1 2008, the company said.

Lier Chemical Co., Ltd. (SZ: 002258), located in Mianyang Economic and Technological Development Zone, Sichuan province, engages in the R & D, production, applications and sales of various heterocyclic chemical products.
   The company's products include herbicide, insecticide and fungicide, with a focus on pyridine herbicides.
   Lier Chemical had operating income of RMB404 million in 2008, up 32.89% year-on-year. Sales revenue gained 32.88% while exports value advanced 36% from a year earlier.
   Net income, however, fell 18.08% to RMB88 million, hit by such negative factors as the appreciated RMB, the Sichuan earthquake and the lowed export rebates.
   The company is relatively less affected by the global economic slowdown as the demand for pesticide is generally rigid. Both the operating income and net income in the fourth quarter 2008 recorded growth from the third quarter.
   For the sales of the company's three major pyridine herbicide products in 2008, picloram surged 70.63%, fluroxypyr grew steadily, while clopyralid fell.

Shenzhen NOPOSION Agrochemicals Co., Ltd., SZ: 002215), a leading domestic pesticide formulation maker based in Shenzhen, Guangdong province, generated operating income of RMB1.1 billion in 2008, up 47.56% year-on-year. Net income rose 40.73% to RMB89.3 million. EPS was RMB0.58.
   The company's growth is driven by its expanded sales and marketing network and launched new products.
   NOPOSION's total assets in 2008 gained 100.20% to RMB716 million from a year earlier, as the company issued 30 million domestic ordinary RMB shares in January 2008 in an initial public offering, which raised RMB278.1 million.

Hebei Veyong Biochemical Co., Ltd. (SH: 600803) boosted sales by 11.42% to RMB784 million in 2008, according to its annual results.
   Net profit, however, fell 49.31% to RMB8.46 million, while earnings per share tumbled 49.30% to RMB0.036.
   The surging prices for basic chemicals in 2008 resulted in higher production costs, the company said. The global financial crisis and the rising RMB also hurt the company's sales and profits as international market accounts for 45% of its business.
   In addition, competition in the domestic pesticide market has heated up as more multinational pesticide companies have tapped the domestic end-user market.
   Shijiazhuang-based Hebei Veyong engages in the production of insecticides, herbicides, acaricides and veterinary drugs, with a research and development center.

   Some pesticides have not released annual results yet, but posted preliminary earnings forecast.

Hubei Sanonda Co., Ltd (Sanonda, SZ: 000553, A share), 200553: B share)), the world's leading methamidophos maker, said 2008 earnings substantially increased as exports rose and it stepped up efforts to save energy and boost efficiency, according to its preliminary earnings forecast released February 18th.

Jiangsu Yongnong Chemical Co., Ltd.(SH: 600486), China's main  pyrethroids production base, also expects growth. The company's products are mainly for exports.

Anhui Huaxing Chemical Industry Co., Ltd.(SZ: 002018), which produces more than 40 kinds of technical and over 100 types of formulations for insecticides, herbicides and bactericides, said in its preliminary results this February its operating income amounted to RMB1.382 billion in 2008, up 62.95% from a year earlier. Net profit surged 167.06% to RMB182 million, EPS gained 166.67% to RMB1.12.

   However, some forecast loss. Shandong Dacheng Pesticide Co., Ltd. (SH: 600882) said on January 23rd it was in the red in 2008, blaming higher costs for coal and raw materials and a plunge in product selling prices. Financial expenses also largely increased after the government raised interest rates several times.

Shandong Huayang Technology Co., Ltd. (SH:  600532) said core revenue and profit fell in 2008 as its main products, such as methomyl emulsion and chlorpyrifos, fell victim to government policy of phasing out such highly toxic insecticides. It also blamed the removal and reduction of export rebates on pesticide exports.

Zhejiang Qianjiang Biochemical Co., Ltd. (SH: 600796) expects a full-year loss of RMB78 million, citing falling sales prices and high-level inventories for its products. The company produces plant growth regulators, antibiotic bactericides and acaricide.

   The manufacturing and marketing for Chinese pesticides makers are largely affected by the crop planting structure and the climate, according to industry experts.
   The drought in early 2009 had caused stripe rust - a disease for wheat - in northwestern and southwestern China, and this could lead to a surge in pesticide demand which will bring business opportunities for pesticide makers.
   Pesticide companies which want to pursue good business performance must adopt differentiation strategy, in addition to great focus on innovation and environmental protection, said one market watcher.